Investment Rating - The investment rating for the company is "Buy" and it is maintained [9]. Core Viewpoints - The company reported a revenue of 9.20 billion yuan and a net profit attributable to shareholders of 0.52 billion yuan for the first half of 2025, representing a year-on-year decline of 19% and 43% respectively [2][6]. - The revenue for Q2 2025 was 5.08 billion yuan, with a net profit of 0.30 billion yuan, showing a year-on-year decrease of 18% and a slight decrease in net profit of 7% [2][6]. - The company is facing operational pressure but is looking forward to a recovery in market conditions [6]. Revenue Analysis - The revenue decline in H1 2025 was primarily due to intense industry competition, the impact of real estate market conditions on new housing demand, and delays in the implementation of consumption policies [11]. - The breakdown of revenue by product categories showed declines of 18.42% for water tanks and accessories, 22.72% for smart toilets and covers, and 6.86% for drainage systems [11]. - Domestic revenue fell by 27.76%, while overseas revenue saw a slight increase of 0.60% [11]. Profitability Analysis - In Q2 2025, the gross margin improved on a quarter-on-quarter basis, with a net margin increase year-on-year [11]. - The gross margin decreased by 1.0 percentage points year-on-year but improved by 2.3 percentage points compared to Q1 2025 [11]. - The company maintained a research and development expense ratio of around 5%, with a total of 2075 patents held as of June 30, 2025 [11]. Market Outlook - The domestic market for smart toilets has significant growth potential, with an estimated penetration rate of only 9.6% compared to more mature markets [11]. - The company is expected to benefit from the implementation of mandatory product certification, which may lead to increased industry concentration as weaker brands exit the market [11]. - The overseas market presents opportunities for expansion, particularly in regions like the Middle East, Europe, and South America, leveraging the company's cost control capabilities [11]. Earnings Forecast - The company is projected to achieve net profits of 1.3 billion yuan, 1.6 billion yuan, and 2.0 billion yuan for the years 2025, 2026, and 2027 respectively, with corresponding price-to-earnings ratios of 23, 19, and 16 [11].